Is there a chance for new social media applications to become just as popular with young people as giants like Facebook, Snapchat, Instagram, Twitter and WhatsApp?
The answer to that question may be found in a recent post on Facebook, in which an Israeli mother describes how she learned from her adolescent daughter about her friends’ coolest new apps.
The group of friends all meet to talk online – not as part of one of the dozens of WhatsApp groups they usually belong to, in which the participants are constantly racing to post the latest text, or image or video response. Instead, they join in a group conversation on live video, the teen explained to her mother.
According to the mom, the girls found a new, refreshing use for the app, which they use to help each other choose clothes. Her daughter, who went shopping while she was abroad, streamed a video from the changing room to her friends back home in Israel showing them which items she was interested in. They helped her decide what was right for her, and what wasn’t – all in real time.
The group video chat application is called Houseparty. Probably most readers have never heard of it, but many will recall the name Meerkat – an Israeli startup that developed a live streaming video platform that was a huge hit on Twitter and Facebook before it went into crisis mode in April 2015, barely two months after launching. Its hopes for an exit or cooperative venture with the major players slipped through its fingers as both Twitter and Facebook launched competitive offerings . Twitter did that by buying Meerkat’s main competitor, Periscope, which spelled disaster for Meerkat. At the same time, Facebook announced it would release its own version of the app. Meerkat – whose real name is the Live On Air company – realized it must very quickly find something else, or face rapid extinction. .
Once considered the great white hope of social networking, Meerkat raised $14 million in March 2015, led by one of Silicon Valley’s premier venture capital firms, Greylock Partners, at a company value of $52 million. Many other well-known and large investors joined in, and the crowds at the South by Southwest Interactive Festival that year loved what they saw.
‘We had no business’
“In August 2015, we all sat down in a room, some 30 people, and understood we had no business,” recalls Ben Rubin, the CEO and one of Meerkat’s founders. “Most private individuals don’t have live [streaming video] conversations in their daily lives; 99% of them are not celebrities, and they don’t really know what to do with it, when to use it and who would want to watch them. There are reports that Mark Zuckerberg pays people to use live video, and Facebook has begun to court professional users.”
Meerkat’s new Houseparty video-messaging app, launched in July, resembles Snapchat a bit -- colorful, simple and based on the selfie camera. It springs into action the moment users begin talking live. Even when the app is not active, every time one of the contacts enters, chat-group members receive a notification. The contacts of anyone who is part of the chat can enter too, although when these newcomers join in everyone else receives a warning: “Stranger danger.”
Houseparty is available in both iOS and Android versions. It has over a million users already, and the company says the numbers are continuing to grow.
The rush by Facebook and Twitter to control the live video-streaming market shows that they expect it to grow quickly and encourage users to use social media platforms even more, and enable the companies to sell more precisely targeted advertising as well. But Meerkat realized they could not rely on using other people’s platforms to make money and that they needed to develop a standalone app.
“Think about the difference between Picassa and Instagram,” says Rubin. “In Picassa, you upload pictures and share them, and in Instagram you have an entire community of followers and activities. The question that guided us in brainstorming was how to get authenticity and intimacy from 99% of the users who are not celebrities. We thought about experience of a house party where, when someone enters, everyone sees them. That’s where the name Houseparty was born.”
Meerkat’s reincarnated app copies the model of chat rooms from the mid-1990s, such as mIRC. “It’s a bit like turning Skype into a social network,” says Rubin.
Meerkat decided to develop Houseparty in stealth mode after the company received the green light from its board to embark on its new venture in October a year ago. Says Rubin, “We brought convincing arguments that live video doesn’t work in the present format, and they told us they stood behind us.”
The company did not want to link the new product with the old name Meerkat to avoid unwanted attention. They even listed the name of the developer of the new app as Alexander Herzick, who it turns out is the husband of Chief Operating Officer Sima Sistani. He was chosen because his social-networking profile was almost nonexistent.
When Periscope was launched in April 2015, a month after your fundraising, analysts said Meerkat would die. You defended the company with your life. What changed by August?
Rubin: “First, we knew it was coming. We knew Twitter was going for Periscope. We said Twitter would go for celebs, media and news, and we wanted to create an alternative community. By August we put out a few more things. For example, we did integration with GoPro, but we also learned that live video was removed from people on a day-to-day basis. We saw that four to seven of the first times the application was used were like a grace period, and the eighth would be even farther away. We realized that we needed to make a switch. In August we sat down to rethink everything. A year ago live video was the next thing, and now it no longer looks that way.”
So what’s special about Houseparty?
“What’s new is that Houseparty is a synchronous social network. Users have advanced cellular devices and the willingness to show their faces to the camera, too. We studied the industry a lot and learned what people like. Houseparty is a social network that reflects what we do in real life: It’s a place people enter in order to be with other people – but live on the internet.
“This is something that does not exist yet. The rule is that when someone enters the app, all the mutual friends know it. It is like entering a room and everyone knows who comes in. I think that everyone is offering a tool for video chats, but we are not a tool – we offer something that is built differently. It’s like turning Skype into a social network, says Rubin.
This is not the first time you have changed your business direction, and your new product is easy to copy. Why will you succeed this time?
“I think the difference now is in the fact that this is a social network, and on social networks the variable of the time of entry is more important. People download the product because it is simple to manage video chats for groups through it, but they will stay with it because of the social network. The same way as you download Instagram in order to use the effects for pictures, but you stay on for the experience: the profile, image collection and community of followers.”
Social network cornerstone
“It is not easy to get a live broadcast off the ground as a feature, if it’s not special use. Houseparty’s DNA lays down the cornerstone for a social network based on live video, that is the company’s message.”
You have compared the service to an advanced stage in the evolution of Skype. Who are your competitors?
“A lot of companies in the industry are busy with video chat technology, but I’m not sure that many are looking at the platform as a social network based on video.”
How will you make money from the new app?
“We haven’t started thinking about the business model, it will take time to develop. Facebook too has still not cracked the question of how to make money from live broadcasting.”
How much money is left from your March 2015 funding round? What was the response of your investors to the change?
“We didn’t burn a lot of money, most of it is left and will be used for the operations of the new company. It wasn’t easy with the investors, but they believe in our new direction.”
You closed most of your operations in Israel and decided to concentrate resources overseas. Will the new project be based on the remaining staff?
“We made the hardest decision half a year ago when we cut manpower. We moved most of the team to San Francisco, and we left the video development department in Israel, whichis run by Itai Danino, one of the founders. Now we are interested in expanding the video engineering department so we are recruiting employees in Israel.”
It is still too early to know if Houseparty will allow Meerkat to relive the popularity of its early days, and competition is fierce. The generation of millennials is moving away en mass from Facebook and is still searching for the apps that will integrate best and most effectively into their changing lifestyles. Group video chats look to be one of the most appropriate solutions for the younger generations, and even for the not-so-young too.
The question is whether success will attract the interest of the giants, in which case they could once again decide to develop their own – or copy – solutions, and Houseparty could find itself left out of the party once again.
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